Dollar reaches 2-week high vs. yen on employment

The dollar strengthened against the euro as U.S. employers added more jobs than forecast last month and the unemployment rate dropped to an almost four-year low.

The 17-nation euro fell to a two-week low versus the greenback after a report that the majority of European Central Bank members indicated support for an interest-rate cut if the economy doesn’t pick up and Germany’s economic outlook was downgraded. Canada’s currency rallied to its strongest in a month versus the dollar as the nation’s employers added almost six times as many jobs as forecast in November. The Federal Reserve is weighing whether to expand the third round of asset purchases known as quantitative easing, or QE3, this month.

“The euro is not our preferred currency and we like to buy dips in the Australian, New Zealand and Canadian dollar,” said Vassili Serebriakov, a currency strategist at BNP Paribas SA in New York. “We still expect the dollar to weaken over time. The Fed is still looking for a sustained improvement in the labor markets and it will take at least six months to see that.”

The dollar rose 0.4 percent to $1.2914 per euro at 10:36 a.m. in New York, reaching $1.2877 the highest since Nov. 23. It was little changed at 82.45 per yen after gaining as much as 0.5 percent. The euro fell 0.3 percent to 106.48 yen.

Mexico, Canada

Mexico’s peso was the second-best performer against the dollar, after Canada, as the unemployment rate fell to 7.7 percent in the U.S., both nations’ largest trading partner.

The gains in the peso were limited after the nation’s inflation rate fell for a second month, bolstering projections the central bank won’t raise interest rates.

The peso rose 0.2 percent to 12.8477 per U.S. dollar. The currency has strengthened 8.3 percent this year through yesterday, the best performance among 16 major currencies tracked by Bloomberg.

The Canadian dollar rose 0.3 percent to 98.82 cents per U.S. dollar after declining as much as 0.2 percent. It touched the strongest level since Nov. 7.

“If we can close lower on the day here and extend below 98.90, the downside opens up quite a bit more,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, said in a telephone interview. “We’re still probably going to touch 97 or 98 over the course of the next few weeks.”

Canadian employment increased 59,300 and lowered the unemployment rate to 7.2 percent from 7.4 percent, the first decline in five months, Statistics Canada said today in Ottawa.